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Calculating Cash Freed Up After Inventory Turnover Increase

Below is selected data for Gertup Corporation as of 12/31/05:

Total assets $ 5,500
Current assets 2,750
Long-term debt 450
Current ratio 2.5
Inventory 1,500
For year ended 12/31/05
Sales $18,500
Cost of goods sold 14,800

Gertup has maintained the same inventory levels throughout 2005. If end of year inventory turnover was increased to 12 through more efficient relationships with suppliers how much cash would be freed up.

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Solution Summary

This solution calculates the cash freed up using the level of inventory required and the current inventory level.